What Are Financial Records?

Financial records are documents that represent transactions of an individual, business or any other organisation.

They typically include:

Cash flow statement

Income statement

Balance sheet

Tax Returns

Statement on retained earnings

It’s useful to monitor them because they provide financial clarity. They essentially aid analysis. They can be useful for assessing how well an organisation is doing and which areas need improvement.

Maintaining these records keeps you compliant with regulations. This also enables you to efficiently manage cash flow. For taxation purposes, having financial records that are in order is advantageous because it simplifies the process and could ultimately save you money if you have hired a bookkeeper or accountant.

They should be presented in a structured way. In addition to this, they should ideally be understandable, reliable, relevant and comparable. These records should be easy to understand and make sense of.

An extensive set of footnotes is used to describe items in further detail. This is also considered an imperative part of the compilation of financial records.

Financial records are useful to a wide range of users. They can also be used to help guide economic decision-making. If you are applying for a loan from a bank, then you need to know that the bank will assess these records thoroughly before making a decision. They will use the amounts in these records to calculate ratios which will provide results that guide how they make decisions.

Prospective investors use financial records to assess investment viability. They typically want to see that an individual or company is in good financial standing and that they are fully capable of maintain their records in a responsible manner.

As a business owner, you will want to have well-maintained financial records for auditing purposes too.